RESEARCH PROJECT REPORT

ON

( ONLINE BANKING )

SUBMITTED TO

IN PARTIAL FULFILLMENT OF THE REQUIREMENT

FOR THE AWARD OF THE DEGREE OF

“BACHELOR OF COMMERCE (HONOURS)”

Batch 2013-16

Session 2015-16

Submitted by:

(Krishna Pratap Singh)

Student of B. Com. (H) V Semester

Roll No.:134500035

Supervised by:

(Deepika Pandoi )

Asst. Professor -Dept. of Mgmt.

GLA University, Mathura

CERTIFICATE

This is to certify that the research project report entitled “online

banking”, is submitted by Mr./Ms Krishna pratap singh student of B.

Com. (H) V Semester of “Institute of Business Management”, GLA

University, Mathura, under my supervision for the partial fulfillment for

the award of the degree of Bachelor of Commerce (Honours), Session

2015-16, Batch 2013-16.

Place: Mathura

Date: ……………………

(………..…………)

Name &

Signature of Supervisor

2

DECLARATION

I Krishna pratap singh, student of B. Com. (H) (V Semester)

Session 2015-2016, Batch 2013-2014 hereby declare that my work

entitled

“online banking”, is the outcome of genuine efforts done by me

under the able guidance of

Mr./Ms./Dr. Deepika pandoi and being submitted to “Institute of

Business Management”, GLA University, Mathura as research project

report in partial fulfillment for the award of the degree of Bachelor

of Commerce (Honours) {B. Com. (H)}.

Place: Mathura

Date: …………………………

Name: Krishna pratap

singh

Course: B. Com. (H) (V Semester)

University Roll

No :134500035

3

ACKNOWLEDGEMENT

Firstly, I would like to express my sincere gratitude to Prof. A. M Agarwal –

Pro Vice-Chancellor and Director - IBM without whose blessings my

summer training project work would not be completed.

I also want to thank our HOD - Prof. Somesh Dhamija for providing me

encouragement, motivation and moral support throughout the project work.

In addition to this I would also like to thank Mr. ……………………,

Assistant Professor IBM who supervised my project. Under his unrelated

support and guidance, my project has taken this shape.

I am equally indebted to my family and friends who always inspired and

motivated me to do something better throughout this project.

At last I would like to extend my sincere thanks to all the respondents to

whom I visited for giving their support and valuable information, which helps

me in completing my project work.

Krishna pratap singh

Course – B. Com. (H) V Sem. University Roll No. 134500035

4

EXECUTIVE SUMMARY

The purpose of the study is to have a comparative study of the online banking .

For the above study a questionnaire was designed and the same was provided to the

respondents for their valuable inputs.

All the aspects of the study included introduction of the study, objective of the study,

research methodology, data interpretation and analysis, suggestions and

recommendations.

The data collection of the study was mainly taken from primary source i.e.

Questionnaire and secondary sources of the data i.e. internet

5

TABLE OF CONTENTS

CONTENTS PAGE NO.

About the Company

Introduction to the Topic, Importance & Objectives

Research Methodology

Data Analysis & Interpretations

Findings, Conclusions, Recommendations & Suggestions

Bibliography

6

CHAPTER1

INTRODUCTINABOUT THEINDUSTRY

7

Introduction

“Online Banking – A Global Way to Bank!”

Today we are in the era of globalisation. Multinational organisations

worldwide have adopted globalisation as their first strategic choice.

Advancement in technology has facilitated globalisation too.  Same

holds true for banking industry.  Technological advancement, changes

and innovations have always leveraged the standards of mankind.  It has

given new dimensions to society.  It has also altered the way services

can be offered.  Information Technology has been a major driving force

of economies worldwide during the last 2 decades.  Its impact has been

readily felt in banking industry also.  With the invention of computer,

operations and database management became quite handy.  When

ARPANET project of Defence Academy of US began, a new

technology was born with the advent of internet. The two technological

breakthroughs – computers and internet has radically changed the way

world can interact and business could be done.  Metamorphosis and

clubbing of these technologies gave rise to the growth of ITeS

(Information Technology enabled Services) across the globe.  There has

been a marked improvement particularly in the area of maintenance,

storage, availability and transfer of data.    The world has literally shrunk

to become a "global village".IT has played a crucial role in the financial

services.  Internet has proved a magic wand for financial services and

products, banking in particular.  Banking sector has been early adopter

of technology to offer latest modes for transacting business.  Banks have

transformed themselves and are offering services through internet. From

computerization to networking to ATMs and now

8

E-Banking banks have moved up the value chain. This phenomenon of

offering services through internet is referred as internet banking.  The

current article discusses internet banking in India and focuses upon key

challenges before banking industry.

Online banking systems in India and the features available with different

banks across India. If you look into the modern age of banking , online

banks or net banking made things much easier for the people and saves

lot of time. The traditional way of standing in the queue and filling up

all the forms, now its no hassle for making any transaction with the

banks. Every bank has their own features and some banks still not

having the more advanced features like transferring money to any banks

across India, easy registration for net banking, etc.

The Internet banking is changing the banking industry and is

having the major effects on banking relationships. Even the

Morgan Stanley Dean Witter Internet research emphasised that

Web is more important for retail financial services than for many

other industries. Internet banking involves use of Internet for

delivery of banking products & services. It falls into four main

categories, from Level 1 - minimum functionality sites that offer

only access to deposit account data - to Level 4 sites - highly

sophisticated offerings enabling integrated sales of additional

products and access to other financial services- such as investment

and insurance. In other words a successful Internet banking

solution offers

Exceptional rates on Savings, CDs, and IRAs

Checking with no monthly fee, free bill payment and

rebates on ATM surcharges

9

Credit cards with low rates

Easy online applications for all accounts, including

personal loans and mortgages

24 hour account access

Quality customer service with personal attention

Advantage of Internet Banking Facility

Advantages previously held by large financial institutions have shrunk

considerably. The Internet has leveled the playing field and afforded

open access to customers in the global marketplace. Internet banking is a

cost-effective delivery channel for financial institutions. Consumers are

embracing the many benefits of Internet banking. Access to one’s

accounts at anytime and from any location via the World Wide Web is a

convenience unknown a short time ago. Thus, a bank’s Internet presence

transforms from ‘brouchreware’ status to ‘Internet banking’ status once

the bank goes through a technology integration effort to enable the

customer to access information about his or her specific account

relationship. The six primary drivers of Internet banking includes, in

order of primacy are:

Improve customer access

Facilitate the offering of more services

Increase customer loyalty

Attract new customers

Provide services offered by competitors

Reduce customer attrition

10

a. Banks with Internet Banking :-

In the current scenario, every bank in India has the internet

banking facility. Recently the banks are extending their presence

in rural areas to lure more customers and show them the

advantages of internet making by educating into the new system.

This gives the countries entire population to get the benefit of

technology advancement. As I said, still it is evolving and not all

the banks provide very advanced features. In our article I will

take few leading banks and explain the features they are

offering.  Note that, the online banking can be for managing

your Savings Accounts, Credit Cards, Fixed Deposit,

Insurance, etc. The following are the list of banks and their

online website address.

ICICI Net Banking

HDFC Net Banking

SBI Cards

LIC India

11

Top 10 Players in Banking

List of Banks in India

RBI ABN AMRO

Bank

Andhra Bank

Axis Bank Bank of

Baroda

Bank Of India

Barclays Bank Canara Bank Central Bank of

India

Citibank Corporation

Bank

Dena Bank

Deutsche Bank GE Financial HDFC

HSBC ICICI IDBI

Indiabulls

Financial

Services

Indian Bank Indian Overseas

Bank

ING Vysya Kotak

Mahindra

Bank

LIC Housing

Finance

Corporation

National

Housing Bank

Oriental Bank

of Commerce

PNB

Punjab & Sind

Bank

Reliance

Money

SBI

Standard

Chartered

Syndicate

Bank

Union Bank of

India

United Bank of

India

12

Banking Services through Internet: -

The Basic Level Service is the banks’ web sites which disseminate

information on different products and services offered to customers and

members of public in general. It may receive and reply to customer’s

queries through e-mail,

In the next level are Simple Transactional Web sites which allows

customers to submit their instructions, applications for different

services, queries in their account balances, etc. but do not permit any

fund-based transactions on their accounts,

The third level of Internet banking service are offered by Fully

Transactional Web sites which allow the customers to operate on their

accounts for transfer of funds, payment of different bills, subscribing to

other products of the bank and to transact purchase and sale of

securities, etc. The above forms of Internet banking service the customer

or by new banks, who deliver banking service primarily through Internet

or other electronic delivery channels as the value added services. Some

of these

banks are known as ‘Virtual’ banks or ‘Internet only’ banks and may not

have physical presence in a country despite offering different banking

services.

The Indian Scenario: -

The entry of India banks into Net BankingInternet banking, both as a

medium of delivery of banking services and as a strategic tool for

13

business development.At present, the total internet users in the country

are estimated at 9 lakh. However, this is expected to grow exponentially

to 90 lakh by 2003. Only about 1 percent of Internet users did banking

online in 1998. This is increased to 16.7 percent in March 2000 (India

Research, May 29, 2000, Kotak Securities).

Cost of banking service through the Internet from a fraction of costs

through conventional methods. Rough estimates assume teller cost at

Re.1 per transaction, ATM transaction cost at 45 paise, phone banking at

35 paise, debit cards at 20 paise and Internet banking at 10 paise per

transaction.

Product and Services Offered: -

Banks in India are at different stages of the web-enabled banking cycle.

Initially, a bank, which is not having a web site, allows its customer to

communicate with it through an e-mail address’ communication, is

limited to a small number of branches and offices which have access to

this e-mail count.

With gradual adoption of Information Technology, the bank puts up a

web site that provides general information on deposits products,

application forms for downloading and e-mail option for enquiries and

feedback.

Vijaya Bank provides information on its website about its NRI and other

services. Customers are required to fill in applications on the Net and

can later receive loans or other products requested for at their local

branch.

14

A few banks provide the customer to enquire into his demat account

(security/shares) holding details, transaction details and status of

instructions given by him. These web sites still do not allow online

transactions for their customers.

Some of the banks permit customers to interact with them and transact

electronically with them. Such services include request for opening of

accounts, requisition for cheque books, stop payment of cheques,

viewing and printing statements of accounts, movement of funds

between accounts within the same bank, querying on status or requests,

instructions for opening of Letter of Credit and Bank Guarantees, etc.

These services are being initiated by banks like ICICI Bank Ltd.,

Citibank, Global Trust Bank Ltd., UTI Bank Ltd., Bank of Citibank

Bank of Madura Ltd., Federal Bank Ltd., etc

Some of the more aggressive players in this area such as ICICI Bank

Ltd., HDFC Bank Ltd., UTI Bank Ltd., Citibank, Global Trust Bank

Ltd., and Bank of Punjab Ltd., offer the facility of receipt, review and

payment of bills online.

The ‘Infinity’ service of ICICI Bank Ltd. Also allows online real time

shopping all payments to be made by customers.

HDFC Bank Ltd. Has made e-shopping online and real time with the

launch of its payment gateway.

Banks providing internet banking services have been entering into

agreements with their customers setting out the terms and conditions of

the services.

The terms and conditions include information on the access through

user-ID and secret password, minimum balance and charges, authority to

the bank for carrying out transactions performed through the service,

15

liability of the user and the bank, disclosure of personal information for

statistical analysis and credit scoring also, non-transferability of the

facility, notices and termination, etc.

The Future Scenario: -

Compared to banks abroad, India banks offering online services still

have a long way to go. For online banking to reach a critical mass, there

has to be sufficient number of users and the sufficient infrastructure in

place.

Various security options like line encryption, branch connection

encryption, firewalls, digital certificates, automatic sign-offs, random

pop-ups and disaster recovery sites are is in place or are being looked at,

there is as yet no Certification Authority in India offering Public Key

Infrastructure, which is absolutely necessary for online banking.

The communication bandwidth available today in India is also not

enough to meet the needs of high priority services like online banking

and trading.

Banks offering online facilities also need to calculate their downtime

losses, because even a few minutes of downtime in a week could mean

substantial losses.

Users of Internet Banking Services are required to fill up the application

forms online and send a copy of the same by mail or fax to the bank.

A contractual agreement is entered into by the customer with the bank

for using the Internet banking services.

16

Domestic customers, for whom other access points such as ATMs,

telebanking, personal contact, etc. are available, are often hesitant to use

the Internet banking services offered by Indian banks. Internet Banking,

as an additional delivery channel, may, therefore, be attractive/

appealing as a value added service to domestic customers. Non-resident

Indians, for whom, it is expensive and time consuming to access their

bank accounts maintained in India find net banking very convenient and

useful.

Cyber crimes are, therefore, difficult to be identified and controlled.

In order to promote Internet banking services, it is necessary that the

proper legal infrastructure is in place.

The Department of Telecommunications (DoT) is moving fast to make

available additional bandwidth, with the result that internet access will

become much faster in the future.

Reserve Bank of India has constituted a group to examine different

issues relating to i-banking and recommend technology, security legal

standards and operational standards keeping in view the international

best practices. In the following paragraphs a generic set of risks

discussed as the basis for formulating general risk control guidelines.

Risk & Rewards

Information technology analyst firm, the Meta Group, recently

reported that "financial institutions who don't offer home banking

by the year 2000 will become marginalized." By the year of 2002,

a large sophisticated and highly competitive Internet Banking

Market will develop which will be driven by

17

Demand side pressure due to increasing access to

low cost electronic services.

Emergence of open standards for banking

functionality.

Growing customer awareness and need of

transparency.

Global players in the fray

Close integration of bank services with web based E-

commerce or even disintermediation of services

through direct electronic payments (E- Cash).

More convenient international transactions due to the

fact that the Internet along with general deregulation

trends, eliminate geographic boundaries.

Move from one stop shopping to 'Banking Portfolio'

i.e. unbundled product purchases.

Certainly some existing brick and mortar banks will go out of

business. But that's because they fail to respond to the challenge

of the Internet. The Internet and it's underlying technologies will

change and transform not just banking, but all aspects of finance

and commerce. It represents much more than a new distribution

opportunity. It will enable nimble players to leverage their brick

and mortar presence to improve customer satisfaction and gain

share. It will force lethargic players who are struck with legacy

cost basis, out of business-since they are unable to bring to play in

the new context.

Operational Risk: -

18

Operational risk, also referred to as transactional risk is the most

common form of risk associated with i-banking.

It takes them from of inaccurate processing of transactions, non-

enforceability of contracts, compromises in data integrity, data privacy

and confidentiality, unauthorized access / intrusion to bank’s systems

and transaction, etc.

Such risks can arise out of weaknesses in design, implementation and

monitoring of banks information system.

Besides inadequacies in technology, human factors like negligence by

customers and employees, fraudulent activity of employees and

crackers/ hackers, etc. can become potential source of operational risk.

Security Risk: -

Security risk arises on account of unauthorized access to a bank’s critical

information stores like accounting system, risk management system,

portfolio management system, etc.

Other related risks are loss of reputation, infringing customers’ privacy

and its legal implications, etc.

Attackers could be hackers, unscrupulous vendors, disgruntled

employee or even pure thrill seekers.

In addition to external attacks banks are exposed to security risk from

internal sources e.g. employee fraud. Employee being familiar with

different systems and their weaknesses become potential security threats

in a loosely controlled environment. They can manage to acquire the

authentication data in order to access the customer accounts causing

losses to the bank.

19

Unless specifically protected, all data/ information transfer over the

internet can be monitored or read by unauthorized persons.

System architecture and design: -

Banks face the risk of wrong choice of technology, improper system

design and inadequate control processes.

Numerous protocols are used for communication across internet. Each

protocol is designed for specific types of data transfer.

A system allowing communications with all protocols, say HTTP (Hyper

Text Transfer Protocol), FTP (File Transfer Protocol), telnet, etc. is more

prone to attack than one designed to permit say, only HTTP.

Many banks rely on outside service providers to implement, operate and

maintain their e-banking system.

Security related operational risk include access control, use of firewalls,

cryptographic techniques, public key encryption, digital signature, etc.

Reputational Risk: -

Reputational risk is the risks of getting significant negative public

opinion, which may result in a critical loss of funding or customers.

Such risks arise from actions which cause major loss of the public

confidence in the banks’ ability to perform critical functions or impair

bank-customer relationship. It may be due to banks’ own action or due

to third parties action.

The main reasons for this risk may be system or product not working to

the expectations of the customers, significant security breach (both due

to internal and external attack), inadequate information to customers

about product use and problem resolution procedures, significant

20

problems with communication networks that impair customers’ access to

their funds or account information especially if, there are, no alternative

means of account access.

Legal Risk: -

Legal risk arises from violation of, or non-conformance with laws, rules,

regulations, or prescribed practices, or when the legal rights and

obligations of parties to a transaction are not well established.

A customer inadequately informed about his rights and obligations, may

not take proper precautions in using Internet banking products or

services, leading to disputed transactions, unwanted suits against the

bank or other regulatory sanctions.

Money Laundering Risk: -

As internet banking transactions are conducted remotely banks may find

it difficult to apply traditional method for detecting and preventing

undesirable criminal activities. Application of money laundering rules

may also be inappropriate for some forms of electronic payments.

To avoid this, banks need to design proper customer identification and

screening techniques, develop audit trails, conduct periodic compliance

reviews, and frame policies in internet transactions.

Cross-Border Risks: -

Internet banking is based on technology that, by its very nature, is

designed to extend the geographic reach of banks and customers. Such

21

market expansion can extend beyond national borders. This causes

various risks.

Such considerations may expose banks to legal risks associated with

non-compliance of different national laws and regulations, including

consumer protection laws, record keeping and reporting requirements,

privacy rules and money laundering laws.

The foreign-based service provider or foreign participants in internet

banking are sources of country risk to the extent that foreign parties

become unable to fulfill their obligations due to economic, social or

political factors.

Strategic Risk: -

For reducing such risk, banks need to conduct proper survey, consult

experts from various fields, establish achievable goals and monitor

performance.

Also they need to analyze the availability and cost of additional

resources, provision of adequate supporting staff, proper training of staff

and adequate insurance coverage.

Other Risk: -

Traditional banking risks such as credit risk, liquidity risk, interest rate

risk and market risk are also present in internet banking.

These risks get intensified due to the very nature of internet banking on

account of use of electronic channels as well as absence of geographical

limits.

22

Credit risk: Is the risk that a counterparty will not settle an obligation for

full value, either when due or at any time thereafter. Banks may not be

able to properly evaluate the creditworthiness of the customer while

extending credit through remote banking procedures, which could

enhance the credit risk.

Another facility of internet banking is electronic money. It brings

various types of risks associated with it. If a bank purchases e-money

from an issuer in order to resell it to a customer, it exposes itself to

credit risk in the event of the issuer defaulting on its obligation to

redeem electronic money.

Liquidity risk: It is important for a bank engaged in electronic money

transfer activities that it ensures that funds are adequate to cover

redemption and settlement demands at any particular time. Failure to do

so, besides exposing the bank to liquidity risk, may even give rise to

legal action and reputational risk.

Risk of unfair completion: -

Internet banking is going to intensify the competition among various

banks. The open nature of internet may induce a few banks to use unfair

practices to take advantage over rivals. Any leaks at network connection

or operating system, etc. may allow them to interfere in a rival bank’s

system.

Thus, one can find that along with the benefits internet banking carries

various risks for bank itself as well as banking system as a whole.

23

2. Internet Banking: Challenges for Banks &

Regulators.

Internet Banking in the United States

New Risks

The Basel Committee’s Electronic Banking Group

e-Finance Oversight

Security Controls

Legal & Reputational Risk Management

Internet Banking in the United States: -

An average industry estimates indicates the about 13 million US

households banked online by the end of 2000 – twice as many as in the

previous years.

24

At the beginning of 2001, 37% of all US national banks, including

nearly all of the largest national banks, were offering full transactional

capabilities online – a near twofold increase in little over a year.

Banks offering Internet-based transaction service – and there are more

of them each day – should be well positioned to compete in the financial

markets of the future.

New Risks : -

Internet banking poses risks that are different from those that bank

supervisors customarily dealt with in assessing credit, market, or interest

rate risk.

First, banks must manage the unprecedented speed of technological

change, and assess how it relates to their technology investments and

their ability to provide consistently high-quality customer service.

Second, bank is increasingly dependent on third parties to provide the

necessary information technology.

Security is another area of significant risk. So far, relatively few

financial institutions have reported being victimized by online security

violations.

The Basel Committee’s Electronic banking Group: -

The Basel Committee on Banking Supervision has taken the lead in this

area through the creation of its Electronic Banking Group (EBG) in late

1999 – a group whose members represent 17 Central banks and bank

supervisory agencies.

25

The major focus of the EBG’s work has been to develop risk

management guidance for Internet banking that will guide bankers and

promote effective and consistent bank supervision around the world.

The EBG has identified fourteen Risk Management Principles for

Electronic Banking to promote sound risk management of e-banking.

These principles are intended to help banking institutions expand their

existing oversight policies and processes to cover their e-banking

activities.

e-Finance Oversight: -

The EBG has dedicated considerable time and effort to communicating

supervisory expectations and guidance for home country supervisors to

oversee cross-border Internet banking activity conducted by their local

institutions.

In February of this year, the Financial Stability Forum’s Contact Group

on E-Finance held its first formal meeting. This group was formed to

promote enhanced information-sharing among the various international

sector-based working groups dealing with e-finance supervisory issues –

e-banking, e-trading, retail payments systems, e-commerce, and so on.

Security Controls : -

Authentication of e-banking customers.No repudiation and

accountability for e-banking transaction of duties.Appropriate measures

to ensure segregation of duties.

26

Proper authorization controls within e-banking systems, databases and

applications.

Data integrity of e-banking transactions, records and information.

Establishment of clear audit trails for e-banking transactions.

Confidentiality of key bank information.

Legal & Reputational Risk Management : -

Appropriate disclosure for e-banking services.

Privacy of customer information.

Capacity, business continuity and contingency planning to ensure

availability of e-banking systems and services.

Incident response planning. The complete EBG Report on Risk

Management Principles for Electronic Banking can be obtained at the

Bank for International Settlements’ web site at

What do Computers do in Banks

27

The different uses of Information Technology: -

Single Window System

Any Time Banking

Automated Teller machine

Shared Payment Network System

Customer Service

Telebanking

Home Banking

Electronic Fund Transfer

Plastic Cards as Media for Payment

Credit Card

Debit Card

Smart Card

ATM Card

Intra-bank and Inter-bank Applications

28

The different uses of Information Technology: -

a) Single Window System (SWS ): -

The cashier or teller who accepts the cash, keys in the data from his

terminal after receipt of the amount.

The amount is straight away posted to the system.

If the customer wishes to update passbook the same is also updated

through the security form printer/pass book printer.

If a customer wishes to obtain a draft, the clerk keys in the details of the

account to be debited and the particulars of the drafts to be issued on the

machine.

The customer’s account is debited and security form printer prints out

draft and clerk can hand over the same to customer duly signed.

b) Any Time Banking : -

This refers to banking service available 24 hours a day and 365 days a

year.

Such facility is made available to the customer through the Automated

Teller machine.

29

Banking, being a service industry, is primarily driven by customers’

needs.

Each customer is willing to pay a price for the services provided it is

made available to him when he wants and where he wants.

In the present day of server competition, banking services are driven by

technology, which is more oriented towards providing better services to

the customer.

The concept of banking hours has been changed from the fixed 4 hours

to 24 hours.

This has been made possible through use of ATMs. Even under the

manual service, the banks have stated to extend the service from the

traditional 4 hours to 5 hours and even up to 12 hours say from 8 AM to

8 PM.

Some banks have introduced the practice of Sunday Banking or Holiday

Banking.

c) Automated Teller Machine (ATM): -

ATM is a machine in the nature of a computer in general sense, but is

dedicated to do certain types of specific jobs only.

The hardware and the proprietary i.e. the software used in one machine

cannot be used in one machine.

30

d) Shared Payment Network System (SPNS): -

The SPNS, named SWADHAN, has been sponsored by the Indian

Bank’s Association (IBA).

It is a network of ATMs, points of sale terminals and Cash Dispensers

with a view to pool the resources of the banks and underlines the spirit

of competition through cooperation.

It became operational in Mumbai on 1st February 1997 and in two years

about 150 ATMs were owned and installed by 38 banks including

foreign banks, public and private sector Indian commercial banks as also

cooperative banks.

The biggest advantage of the network is that the ATM cards issued by

different banks can used at any member banks ATM.

Banks can have as many ATM as they want and follow some standards

set by the SPNS committee.

The heart of the network is the Switch and its main components are:

Tandem Mainframe Computer, BASE 24 Software, Motorola

networking equipments and the leased lines.

e) Customer Services : -

The following customer services are offered through the system:

Cash withdrawal (up to a specified limit)

31

Cheque/Cash deposit (the receipt being only for the deposit of the

envelope containing cash but not for the amount therein)

Enquiry about balances

Printing of statement of accounts

Request for cheque book and standing instructions.

Transfer of funds

PIN change

f) Telebanking : -

From the conventional banking, where the services were provided

manually across the table, it has come to a stage where the customer is

not required to visit the bank enquiry of balance in the account, sending

a remittance, to get a statement of account, etc.

The concept has become so popular that in USA customers do not visit

the bank for 97% of their transactions and these are done from either

customer’s residence or office using a telephone or a home PC.

In telebanking the customer is required to open the account with the

bank initially by visiting the bank.

Telebanking services are, generally, provided by the bank over the

telephone on a special number.

The number at the bank is connected to a terminal in the bank, which is

either handled manually or is automated by connecting the same to the

computer network.

32

Where the system is automated, two types of technology are used.

g) Home Banking: -

Under home banking the customer is served at his residence and there is

no need for the customer to visit the bank’s premises for a number of

routine transactions.

If the customer needs some information the same can be got by

contacting the bank over the phone as described in the telebanking.

If the customer wants to put through transaction and wishes to see his

account or to get a statement of his account, he may have to use a PC.

This type of facility is available with a town, city or metropolitan area.

Under such a situation the customer should have a:

PC

Modem

Telephone line

A compatible software for the home PC

The home banking service can be broadly classified under two groups,

one without using the information technology and another using

information technology.

33

When customer contacts the bank o the phone no specific technology is

involved and the service of telebanking is provided to him.

h) Electronic Fund Transfer (EFT): -

In India the fund transfers are basically done through Mail Transfer,

Draft or Telegraphic Transfer.

In case of Telegraphic Transfer (TT) again the Department of

Telecommunication was the sole provider of Telephone, Telex and

Telegram facilities.

With the process of liberalization private operators have started

providing alternative voice communication channels through mobile

phones and vast communication as an alternative channels for data

communication.

It was normal for any TT to be credited to the beneficiary’s account after

delay of 2 to 4 days

The different forms of EFT prevalent in the use are:

EFT through Electronic Data Interchange

BANKNET

RBINET

IDRBT VSAT Network

EFT from Point of Sales

34

Electronic Cash

SWIFT- Global System for Funds Transfer

Electronic Clearing Settlement

i) Plastic Cards as Media for Payment: -

There are four types of plastic cards being used ad media for making

payments. These are:

Credit Card

Debit Card

Smart Card

ATM Card

1. Credit Cards: -

The credit card enables the cardholders to:

Purchase any item like clothes, jewellery, railway/air tickets, etc.

35

Pay bills for dining in a restaurant or boarding and lodging in a hotel

Avail of any service like car rental, etc.

2. Debit Card: -

A debit card is issued on payment of a specified amount by the issuing

company like a telephone company to a customer on cash payment or on

debiting his account by a bank.

Thus it is like an electronic purse, which can be read and debited by the

required amount.

It may be noted that while through a credit card, the customer first

makes a purchase or avails service and pays later on, but for getting the

debit card, a customer has to first pay the due amount and then make a

purchase or avail the service. For this reason, debit card are not as

popular as credit cards.

3. Smart Cards: -

Smart Cards have a built-in microcomputer chip, which can be used for

storing and processing information. For example, a person can have a

smart card from a bank with the specified amount stored electronically

36

on it. As he goes on making transactions with the help of the card, the

balance keeps on reducing electronically. When the specified amount is

utilized by the customer, he can approach the bank to get his card

validated for a further specified amount. Such cards are used for paying

small amounts like telephone calls, petrol bills, etc.

In India, a smart card, suiting Indian banking environment, is being

developed and tested at IIT, Mumbai, in collaboration with the RBI and

SBI. The card is being used as an experimental tool for promoting

cashless society in and around the IIT Campus. The latest smart card

being developed will combine all the features of electronic purses, credit

cards and ATM cards.

4. ATM Cards: -

The card contains a PIN (Personal Identification Number) which is

selected by the customer or conveyed to the customer and enables him

to withdraw cash up to the transaction limit for the day. He can also

deposit cash or cheque.

Function of ATM Card: -

The customer has to enter the card into the machine slot. The machine

first reads for hot carding of the card number, i.e. it checks whether the

card has already been cancelled or placed on the rejection list.

Rejection can be because of the reason like lost card or stolen card.

37

The machine then reads the PIN and asks for the PIN from the customer.

If the PIN matches, it presents the main menu on the screen. The menu

contains options from which the withdrawal option is selected.

The ATM then checks whether the amount is under the day limit

magnetically inscribed by the customer. Accordingly, the ATM dispenses

cash. It then releases the card and a printed statement comes out of the

slot.

5. Intra-Bank & Inter-Bank applications: -

Computerization is now all pervasive in banks. Almost all the activities

in a bank can be performed more efficiently with the help of computers.

Broadly, we can divide the applications of computerization in banks in

two types

A)Intra-Bank Applications: -

Funds transfer and payment message

Banks owned ATM/Credit Card and other application on the corporate

network

Inter-Branch Reconciliation

Quick disposal of loan/investment proposal

38

Funds information from clearing centers to the fund management office

for optimal allocation of funds.

Cash Management Product

Treasury Management

Any Branch Banking

Asset Liability Management

E-mail

Software distribution in the bank

Organizational bulletin boards may contain the following:

Circulars

Newsletters, phone and address directories

Undesirable parties

Missing security items

Confidential circular on attempted frauds.

Human Resources Development and Personnel Administration

Auditing and Inspecting computerized branches using the network

Organizational database may include

Statutory returns

Control returns

Standardized returns

39

Management Information Systems

Borrower’s profile

Branch profile

Employee analysis

Product/service profile

Business profile of branches.

Apart from providing efficient service to customers the financial

network will also fulfill the following objectives:

Timely information to top management

Helping in development of new products

Speedy communication among branches and with the controlling

offices.

B) Inter-Bank Applications: -

Electronic Funds Transfer

Retail EFT (Small value credit transfer) on net settlement basis.

Wholesale EFT (Large value credit transfer) on Real Time Gross

Settlement (RTGS) basis for time critical payments.

40

Clearing and settlement systems for securities – Delivery vs. Payment

(DVP). The final delivery of securities will occur if and only if final

payment occurs.

Transferring balance from net settlement systems to RTGS Server at

periodic intervals. The net obligation could be from:

Local paper-based clearing

Inter-city paper-based clearing (including IT discounting facilities)

Bulk payments – ECS (Debit, Credit, RAPID) including intercity.

Shared ATM networks

Smart cards and other pre-paid/pre-authorized debit cards

Exchange of defaulting borrowers list among RBI and banks

EDI services to the extent they pertain to payment cycle to EDI

(Electronic Data Interchange)

Consolidation of current account balance from the existing DAD

(Deposit Accounts Department in RBI Offices) applications

synchronously/asynchronously to facilitate balance enquiry by banks on

all India/center-wise basis and if necessary to activate transfer of funds

among DADs at different centers.

Reporting of government account transactions

Reporting of BSR (Basic Statistical Returns) etc. to RBI

Asset Liability Management

41

Intranet in RBI to enable banks to get circulars, press releases etc.

Returns to be submitted by the banks to Departments of Banking

Supervision (DBS) for off-site supervision and monitoring.

Credit Card Frauds

42

Credit Card Frauds

Meaning

Defrauder

Aware of Credit Card

Advantages of Credit Card

Credit Card Frauds

The Prevention of Frauds

Duplicate Card

White plastics

Banker’s Role

Cyber Laws

Altering Sale terminals

Internet Relays

Monitoring Deposit

Risk Management

Central Credit Card Clearing House

Loss of Credit Cards in Transit

43

Fraud Consciousness

Physical Evidence

Check the handwriting

How to Accept the Master Card

How to get Reimbursed

ICICI Bank: Case Study

Credit Card Frauds: -

Meaning: -

A credit card is a money transaction device without using cash or

fiduciary documents.

Defrauder: -

The defrauder has been slow to exploit the credit card, for making a fast

buck. In USA, he made 15 million dollars. Through the cards, in 1981,

In 1982 his earning through the card, rose to 50 million dollars. In 1983,

the fraudulent card brought over 100 million dollars to its creators. The

fraudulent card industry is rising higher and higher to dizzy height every

44

year. Like other countries if the genuine credit card has come in India,

the fraudulent credit card cannot be far behind.

Aware of Credit Card: -

The credit card, as already seen, is a money transaction device. The

institutions issuing the credit card give the card holders authority to

obtain money, goods, services or any other thing of value, on credit.

They guarantee payment of debit so raised. These institutions are banks

and other financial institutions, clubs and travel agencies and

departmental stores, etc. Credit Cards, Bob Cards, Master Cards, Visa

Cards, express Cards, Euro Cards have wide circulation. Some of them

have wide circulation. Some of them have world-wide circulation..

Advantages of Credit Cards: -

Following types of safety measures are being introduced increasingly in

the credit card manufacture. They can be adopted with advantages

Simultaneous printing on both sides of the cards,; creating some

superimposed graphics, patterns, digits or writings.

Multi-layered laminates incorporating lateen images which may

distinguish the genuine from the forged.

Intricate graphics and distinctive letter and digit designs.

Laser printing to engrave the letter and digits on the credit card.

45

Three dimensional insignia, logo of high artistic quality on the credit

card.

Encoded information track in magnetic inks on magnetic stripe.

Cards inserted in the imprinter head, designed and manufactured to rigid

specification to permit limited tolerance to admit only genuine credit

cards.

Secure Signature Panel.

3- Dimensional hologram.

U.V. fluorescent images and designs.

Micro printing

Optically illusive figures, designs, etc.

Heavy duty embossing logo.

Credit Card Frauds: -

Credit card frauds manifest themselves in a number of ways:

Genuine cards are manipulated.

Genuine cards are altered.

Counterfeit cards are created.

46

Fraudulent telemarketing is done with credit cards.

Genuine cards are obtained on fraudulent applications in the

names/addresses of other persons and used.

It is feared that with the expansion of E-Commerce, M-Commerce, and

Internet facilities being available on massive scale, the fraudulent fund

freaking via credit cards will increase tremendously. The shape it takes

will be limited only by the ingenuity of the future.

4.2 The Prevention of Frauds

Duplicate Card: -

The duplicate fraudulent credit cards are those where the defrauders

have made sincere efforts to duplicate the original cards through photo-

mechanical processes.

They follow the footsteps of the original manufactures of the genuine

credit cards to produce as close a replica of the genuine card as possible,

employing similar materials and similar processes of printing and

embossing, besides magnetic encodings.

47

White Plastic: -

The counterfeit credit cards known as ‘white plastics’ are imitations of

credit cards in general aspect.

Banker’s Role: -

The credit card industry is one of the fastest growing activities of the

banking industry. The artist has to be there (where the money is). The

banks have to suffer losses.

Cyber Laws: -

Information Technology Ministry be approached for stringent laws

against credit card crimes.

Altering Sales terminals: -

Internet E-Mail should be utilized on the pattern of Hot Box organized

about a decade ago suitably modified to benefit from the advances the

information technology has made since them.

48

Internet Relays: -

Computers should be pressed into service via internet connection by

suitably upgrading the Television System Vertical blanking Intervals for

notifying the fraudulent cards in the market.

Monitoring Deposit: -

Monitoring system can help locate the unscrupulous merchants who use

or allow the use of ‘white plastics’ and fraudulent cards, knowing full

well their fraudulent nature for making a fast back.

Risk Management: -

To meet the menace one of the top card companies has imitated risk

management service to identify these high risk centers where daily all

49

the inter-change transactions of the areas are scrutinized and the credit

card

number are checked against those which have been declared fraudulent,

stolen or lost.

Central credit Card Clearing House: -

There should be a joint list of credit card holders on central basis with

their addresses and other details, if any. New applicants to any bank for

credit cards should be checked: -

If he is holding card from other issuers.

If he has held a card at other times. If so, when? Why did he

discontinue?

If he has applied to more than one credit card issuers

The new card holder’s business transactions should be watched for some

time.

Loss of Credit cards in Transit: -

It must be prevented.

It is simple for either the customer to collect personally or the banker

should deliver it personally, or it should be sent by courier and

confirmation obtained on telephone, in addition to the paper receipt.

Fraud Consciousness: -

50

The problem of credit card frauds must be brought to the notice of users

as well as of the servers at sale terminals.

Proper training in the check up of the credit card in its various aspects

has no substitute and in view of the huge issues the same is

indispensable.

Physical Evidence: -

Immediately on the discovery of fraud all the physical evidence

available should at once be taken into possession and the case reported

to the police for investigation.

Check the Handwriting: -

Handwriting (in signatures) is available on sale drafts and on credit

cards. The comparison of hand-writing inter se and with that of the

suspect and of genuine card holders, can lead to the identity or non-

identity of alleged writer.

How to accept the Master Card: -

Master Card International guarantees payment of all Master Card

Travelers Cheques if the following procedures are followed: -

Watch the customer signs each cheque in ink on the countersignature

line.

Compare this signature to the original signature. Ensure they look the

same.

51

If a cheque is already countersigned, or if you doubt the two signatures

are the same, ask the customer to sign the cheque again on the back for

comparison. Also, request identification such as a passport, driving

license or similar document, and write the details on the back of the

cheque.

If a cheque is presented by anyone other than the original purchaser,

treat it the same way you would a personal check from a third party. You

should know the customer and be able to contact the customer if there’s

problem.

CHAPTER2

INTRODUCTION ABOUT THE

STUDY

52

SWOT ANALYSIS:

A SWOT Analysis is an effective tool which can be used to examine the

issues which will directly affect the success of alternative delivery

mechanisms. In our opinion, the SWOT analysis is as follows:

Strengths:

• Customer access to information 24 hours per day.

• Timely access to information.

• The ability to offer a customer more than one method of retrieving

information.

• Sophisticated technology systems will help to make a banking

institute "future-proof."

• Diversity helps capture different types of markets.

• The ability to cut internal costs due to advanced technology.

• Increased efficiency due to automation.

• Increased accuracy of banking transactions.

Weaknesses:

• High price of service.

• Continual altering of customer wants and needs.

• Hostile feelings of employees due to possible pending lay-offs due to

automation.

• Multiple options for the customer.

• Initial investment in technology will be expensive.

53

Opportunities:

• The ability to obtain a larger customer base.

• Global expansion. This is an enormous market, which will be a great

opportunity in the future.

• The ability to take advantage of the growing popularity of Internet

banking.

Threats:

• Continual changing technology.

• Uncertainty of the banking industry.

• Competition from "lower price" operations.

• Possible failure of product due to non-acceptance of customer.

• General competitiveness of the banking industry.

Multi-national and private sector banks in India have been very

successful in setting up Internet banking services. This is mainly

because these banks already had a robust

Stamp or write your company name on the front of the cheque where it

says, “Issuer will pay to the order of…..” and also endorse at the back of

the cheque.

Deposit cheques in your bank as cash items. US dollar Master Card

Travelers Cheques, regardless of location of issuer, are cleared and paid

in the US.

Do not send cheque directly to the issuing institution.

4.5: Credit Card Fraud in ICICI Bank:

54

ICICI Bank Credit Card Division is a Shame:

I lost my card a few months back and it was used by someone to make a

transaction of about 18k I raised a dispute with ICICI Bank which was

settled against me. After spending a month trying to get a copy of the

investigation report from ICICI Bank customer care and their hallowed

and inaccessible Chargeback Department - I have finally received it, and

guess what, it’s an utter pack of LIES!!

I am not kidding - some of it is plain unbelievable.

Here are some snippets from the report. CM=customer, ME=merchant

“ME told us that CM came to his outlet and taken original charge slip &

bill, no clue found, however the identity of card user was not

ascertained, on asking CM of show charge slip and bill copy he refused

to show. “

Wow! I was never asked for a charge slip by the investigator, nor did I

have one. I accompanied the police to Big Bazaar (the merchant), where

the police collected the IMEI codes (the card was used to buy a couple

of phones), but not the charge slips. I went again recently, and I was told

that I could not get the charge slip from the merchant now, without the

consent of the bank.

So the investigator not only turned me into someone who “refused” to

show charge slip (when he has a disputed transaction of 18k!), he has

turned the merchant into a liar as well! So they don’t just screw their

retail customers, but even their merchants!

55

CM had not informed field team that he himself had visited to ME ‘BIG

BAZAAR’ for investigation, When asked for charge slips CM refused to

show charge slip and bill copy.

CM was not responding well during Investigation.

The point is reiterated, and evidently “I had not informed the field team

I had visited the merchant”. This when I myself, gave the field team the

contact number of the concerned

employee at Big Bazaar. Oh! By the way that amounts to

“not responding well during investigation”

CM is not working anywhere and staying in a hostel in Gurgaon.

This one takes the cake. It literally threw me over the edge. Here I

am, a director of a pvt. ltd. company, staying with my parents in

Gurgaon - he turns me into an unemployed hosteller! Phew!

Unbelievable. And this is when the investigator visited me at my

residence!

So, you see what a fraud ICICI Bank credit card division is. Until now,

my concerns were around long waiting times, long turnaround times -

but this takes it to a whole new level.

Banks Control in Online Banking

Will Banks Control Online Banking: -

o Internet Banking in India

o Real threats

o Online

Banking in the Cyber world: -

56

o Internet Purchases without Payment Gateways

o Risk of Gateway

Will Banks Control Online Banking: -

Internet Banking in India: -Online banking is expected to explode in the

next few years. We will be entering the age of non-physical exchange of

cash aided by complete transparency leading to perfectly competitive

electronic market place and inevitably to customer supremacy. Growth

in online banking will be driven by the following reasons:

Increasing access to low cost electronic services

Emergence of open standards in the banking industry

Improved customer awareness

Entry of global majors in the market

Integration of banking services with e-commerce and emergence of e-

cash

Convenient international transactions as Internet eliminates geographic

boundaries

Shift from one-stop shopping to unbundled product purchases

Internet Banking sites can be segregated into four categories from Level

I, which offer just minimum functionalities such as access to one’s

deposit account data, to Level IV sites that offer sophisticated services.

To be successful, an Internet bank must offer:

High rates on deposits

57

24 hour access

Free checking and bill payment facilities with rebates on ATM

surcharges

Credit cards with low rates

Simple and easy online applications for all accounts including personal

loans

Innovative products

High quality customer service

Real Threats: -

A majority of leading online brokers are beginning to offer

banking products and services as part of their overall offers.

They are actively seeking to capture “excess” balances in existing

checking and saving accounts by offering better rates.

There are other threats to banks as well. Several leading system

providers have developed “bank-in-a-box” solution – unbranded,

electronic, full-service, virtual-bank system – that can be bought,

branded, and offered to consumer by any authorized company

that wishes to provide banking service.

Online: -

An online service that merely mimics an offline one has a second

problem as well; it doesn’t give customers an adequate inducement to

move a significant portion of their banking online.

As a result, most customers tend to tend to treat online banking as no

more than an extra channel to check their balance and transaction

58

histories, and they continue to do the rest of their business at the ATM or

the teller window.

A vicious offering increase the banks’ total costs. This makes the banks

reluctant to make further large investments in the online channel, which

thus, does nothing to move customers away from tellers and ATMs.

In fact, consumers didn’t stop using tellers to the extent that banks has

hoped, but they also used ATMs so frequently that the reduction in cost

per use was more than offset by the higher volume of transactions.

The study of information systems through broad band connection,

satellite, a network or through a view chat.

This online information system provides information about all aspects,

Information providing on the demand of the subscriber.

This online information system may be of study program, a graduation

program or sharing of data through internets, extranet and internet.

Sharing of Data: -

The data base store data and information extracted from selected

operational and external databases. The database has most needed

information by a manager or any end users. This database can be

accessed by the ONLINE ANALYTICAL POCESSING (OLAP)

systems.

59

This network model can access a data element by several paths. In an

organization departmental records can be related to more than one

employee record.

Thus in an organization data can be shared through internet, internet and

extranet.

Online Learning: -

This online information system provides online courses through internet,

broad band satellite connection.

The recent online course is provided by XLRI, (Xavier Labour Relations

Institute) joined hands with Hughes Escorts communication limited.

Their main course is on BUSINESS MANAGEMENT.

Hughes Escorts is the Indian Operations of US – based communication

major, Hughes network systems, which is a wing of Hughes electronics.

This job is being done by Directing Global education which is joint

venture between Hughes network systems and one touch knowledge

systems.

This job arrangement with Hughes Escorts to offer Management training

on satellite platform will take expertise of XLRI faculty beyond the

borders of their concern.

This information has live videos, voice and transmission to classes

through Hughes broadband satellite network. Interaction is through

voice and data.

This course is conducted across through four metros, Trichy, Bangalore,

Hyderabad, Chandigarh, Pune, Kochi, Coimbatore and Madurai.

This course is targeted at working executives

60

Country Studies: -

This country studies by online service is from 1988 onwards. In this, the

study of every country is made.

B-B (Business – Business E-Commerce). Despite the entire buzz, we

still don’t know about what makes B-B. there is a growing relation that

B-B will take years to mature, and the rate of adoption – even if

companies deliver a huge value equation improvement – will be gradual

because it requires system and individuals to act in fundamentally new

ways.

The next thing after B-B is enabling technologies to incorporate more

sophisticated back-end integration system, financing options and

logistical support.

In India, NASSCOM puts the value of online B-B transactions at Rs.

400 crore in 1999-00 of total E – Commerce of Rs. 450.

But the question is how much B-B-E-Commerce is really happening in

India? It is hard to quantify in terms of real numbers with no established

data available in specific reference to the Indian context. But there is a

possibility of this business assuming a huge proportion in future.

B-B has been happening all through and a new channel has been opened

with the advent of the Internet. Obviously organizations will switch over

to this channel for the cost – effectiveness it provides. The market is

emerging in the country and it will be a boom time in the next year.

Banking in the Cyber world : -

61

Internet Purchases without Payment Gateway: -

The dangers are three-fold

Since a manual process requires human intervention, risk of information

leakage exists.

No exchange of Digital ID, so no authentication of the merchant – risk

of bogus merchant.

No exchange of Digital Certificate to authenticate card holder – risk of

repudiation of transaction by the card holder.

The benefits which the user would get by using the Internet payment

gateway are

Card details travel encrypted on the Net (if encryption facility available

on the gateway).

On-line status of order, if the gateway has on-line authorization.

Secure Merchant identification, so that fraudulent web sites posing as

genuine merchants get weeded out

A payment gateway is software that supports multiple payment models

simultaneously in a safe and secure manner.

Funds can be transferred through credit, debit and smart cards, cheques,

electronic payment wallets and even direct debits through a central

payment switch.

Put simply, a payment gateway enables on-line commercial transactions

on the internet on a secure system, which have firewalls against hacking.

62

Risk of Gateways: -

Currently, in India – HDFC Bank and ICICI – have launched payment

gateways for business to customer (B2C) transactions.

Payments can be effected through credit cards or through directly

debiting the account of the customers of the respective banks.

Some payment mechanisms on the Internet are not safe, as they are in

the open-loop where a merchant portal can see the credit card number.

This is unsafe for credit card holder and is susceptible to fraud as his

number can be physically seen.

The dust is yet to settle in the B2C payment gateways, but action is

already heating up in the business to business (B2B) arena.

Besides HDFC Bank and ICIC, Global Tele-System and a few other

non-bank companies are toying the idea of launching payment gateways

for inter bank and B2B transactions.

No prizes for guessing who they are targeting, Nationalized banks, of

course.

Recent E-Mail Fraud:-

ONLINE fraudsters targeted ICICI Bank customers through spam mail

that asked them to disclose passwords and other information, but the

bank said no financial loss was reported so far.

E-mails from `support@icici.com' with the subject `Important

information from ICICI Bank' and `Official information from ICICI

63

Bank' started circulating from Monday. Once opened, the mail asked

customers to click on a link.

"For security purposes your account has been randomly chosen for

verification. To verify your account information we are asking you to

provide us with all the data we are requesting. Otherwise we will not be

able to verify your identity and access to your account will be denied.

Please click on the link below to get to the ICICI secure page and verify

your account details. Thank you," the e-mail said.

The ingenuity of the e-mail is striking as when clicked on the link, it

opens a Web page that is an exact replica of ICICI Bank's and

simultaneously opens the bank Web site.

Customers were asked to key in their identification number, login and

fund transfer passwords. The link, however, didn't work on Wednesday.

An ICICI Bank spokesman said so far no financial loss was reported

because of the fraud. "It's not easy to say how many of our customers

have got it. First, we felt it will be a large number. But now our

assessment is it's a small number," the spokesman said.

ICICI Bank sent e-mail to its customers, warning them about the fraud

and urging not to respond to such mails. "Such fraudulent

communication may also be sent via SMS or the phone," the bank said.

The ICICI Bank spokesman said the bank has alerted the cyber crime

cells about the spam mails. But the origin of the spam mail had not been

traced, he said.

Such fraudulent mails are becoming rampant across the world as

Internet banking has grown in popularity. Online fraud: 60-yr-old seeks

police action against ICICI Bank officials:-

64

Karve Nagar resident Vinod Malhotra suffered a loss of Rs 95,000,

which was transferred through 19 phone bank transactions in just two

minutes

While cyber criminals are on the prowl, the increasing number of online

fraud has also put a question mark on the security system of banks.

Vinod Malhotra, a 60-year-old citizen from Karve Nagar, who lost Rs

95,000 to an online fraud, gave a letter to the Shivajinagar police station

today requesting the investigation officer, police sub inspector S B

Ghorpade, to book the ICICI Bank authorities in the case.

The police have so far booked Bhavin Gunwantilal Kakadia of Chira

Bazaar, Mumbai. That is because Malhotra’s money was transferred into

Kakadia’s account on June 2. But Malhotra has alleged that the loss

occurred because ICICI Bank failed to protect his account.

Malhotra received a fraudulent e-mail on April 18, carrying a logo of

ICICI Bank, seeking his credit card account details. Taking it to be

genuine request, the elderly citizen submitted the details. He then sent an

e-mail to ICICI Bank to check if they had actually sought the

information.

On April 20, the bank replied that it was a fraudulent email. But on April

21, fraudsters used his credit card for booking tickets worth Rs 4,000 for

Adlabs theatre, Mumbai. On April 21, the credit card was again used for

online shopping worth Rs 3,083 through a US-based website.

Malhotra received the customary SMS alert about this transaction. He

immediately contacted the bank and submitted details of the illegal

transactions. The bank replied that it was a “phishing” attack. The bank

then blocked his credit card and issued a new one, assuring him that his

account would be protected properly.

65

But again on June 2, Rs 95,000 was transferred from his savings

account. A stunned Malhotra filed a complaint with the Kothrud police

on June 3.

The case was transferred to Shivajinagar police station since his account

was with the Shivajinagar branch of ICICI Bank. “When I went to the

bank with the police, a senior officer from the Operations Department

said that money was transferred from my savings account through phone

banking,” said Malhotra.

“The officer said that my mobile number was changed from the system.

The fraudster replaced it with an Airtel mobile number from Punjab and

then transferred money to Kakadia’s account through 19 phone banking

transactions of Rs 5,000 each in just two minutes,” he added. “The

money was further transferred to a private business firm’s account in

Mumbai and withdrawn by the fraudster using cheques,” he added.

Malhotra said that he had given his mobile phone number to ICICI Bank

only for receiving SMS alerts on account details. “I never used the net

banking and phone banking facility. I don’t even remember the

passwords required for these facilities. So there was no chance of me

submitting the passwords to any phishing mail or person. I believe the

fraud could have been avoided if ICICI Bank had not failed to keep

vigilance on its internal security system,” he said.

Malhotra communicated with K V Kamath, the MD and CEO of the

bank, requesting him to investigate the case and repay his money. After

a 30-day internal investigation, ICICI Bank replied that it was not at

fault and would not compensate for the loss. So Malhotra lodged a first

information report (FIR) with the police on July 12. On Tuesday, the

bank replied that his case would be re-investigated.

66

When contacted, ICICI Bank Head (Corporate Communications)

Charudutta Deshpande said, “ICICI Bank has a fool-proof security

system. But we don’t doubt the genuineness of our customers. Proper

investigations will be done.”

Police Sub-Inspector Ghorpade said, “We have dispatched a team to

Mumbai for investigations. But there is not much progress because the

bank has not yet given us complete information about the suspects.”

“We have not yet booked the ICICI bank officials. But we would be

interrogating bank officials if required,” he said.

Pune police Cyber Committee Coordinator Sudam Choure said, “There

have been cases in the past where secret information was leaked from

banks. Usually, the bank employees on contract basis or courier

companies were involved in the frauds. There is need for the banks to

increase their internal security system.”

Recommendations: -

Technological development has been nothing less than explosion. Banks

have been harnessing such technological innovations on one hand and

adapting themselves to such changes on the other hand.

67

The most significant event has been development of semi-conductor

technology, which has resulted in spectacular expansion of automation.

Processing, storage and transmission of information is very essence of

banking and financial services.

The electronic technology has bought revolutionary changes in these

areas. The elimination of paper as medium for processing and storage of

transactions / information has been a great event. Large volume of

information can be processed, stored and retrieved very economically at

terrific speed, which is not possible manually.

The space required for managing enormous volume of information has

been reduced dramatically.

With the revolution in telecommunication technology, information can

be made accessible from remote distance at lightning speed. The final

output

of information after manipulation and analysis can be printed by printer

at high speed directly from computers.Thus, the computer now has the

ability to retrieve data or update files instantaneously. Subsequently with

the development in telecommunication, Local Area Network

(LAN)/Wide Area Network (WAN) have been established.

ROLE AND SIGNIFICANCE:

If computerization has today become a byword in banking, its sustained

growth is wholly due to its role as an enabler in the smooth and efficient

conduct of a whole range of banking practices. Computers were

68

originally destined for a minor role in banks, primarily intended to

facilitate accounting transactions. Subsequently, once its superiority was

firmly established, it grew in status as a tool for management

information and a host of other inventions. Although the accounting

aspect is still quite important and relevant, IT has a far greater role to

play to day to day banking operations, especially in decision making

process. Further, facilities like ATM, Anywhere Banking, Internet as

well as Mobile Banking have been increasing their presence. It has, to

be conceded that ‘Information Technology’ is not the end in itself, but is

useful tool in the hands of the management to leverage business

prospects in its favour and enhance efficiency.

Banks now have come under great pressure to reduce operational costs

to safeguard their bottom lines. With banking tuning more and more

customer-centric with every passing day, technology as an enabler has

helped banks to launch a whole array of customer-centric products such

as ATMs, Debit Cards, 24 hour Anywhere Banking. The nomenclature

‘Banking Accounts’ have also yielded to more sophisticated term

‘banking relationship’. Customer Relations Management is now a very

potent and potential concept. Internet - Banking also has a role to play in

ensuring a fair return to shareholders, by facilitating in ensuring greater

profits to the banking sector. The recent emerging trends in self-service

channels, name ATM,s, Call-centers, Internet and mobile banking would

increase the use of E-banking as this offer the twin benefit i.e.

convenience to the customers and reduction and cost of operation to the

banks. Internet - Banking can increase the easy access of internet

facilities among the masses which would raise the comfort level for

transacting via the web. The popularity of internet banking likely

depends upon inculcating in customers about their security and personal

privacy of their money and assets.

69

Chapter3

Data analyses and interpretation

70

71

Q1. Do you know about online banking?

interpretation

In this graph yes is90%and no is 10%.

72

Q2. From how many years you are using internet banking ?

interpretation

in this graph there are 40% users using internet banking from 0-2

years ,24 %users using e banking from 3-5 years,10% users using e

banking from 5 years and 26% users are using e banking more than 5

years.

73

Q3. Your Occupation?

interpretation

74

in this graph ,there are 6% users are occupation is service, 8% users are

doing business ,,4% users are retired and 82% users are comes in other

occupation.

Q4. Your Income (in Rs monthly)?

interpretation

75

30% users have income 10000-15000, 44% users have income 15001-

25000,

26% users have income above 25000.

Q5. How often do you use online services ?

76

interpretation

12% users using e banking in daily basis, 28% usres using ebanking in

weekly basis, 44% users using e bankig in monthly basis, and 16% are

not using e banking services.

Q6. What are the reason for choosing online banking services ?

77

interpretation

20 % users are choose for its convenience, 40 % users are choose for to

save time, 20 % usres are choose for 24 hours access to a/c and 20% are

others.

78

Q7. Which online feature do you use regularly?

interpretation

in this graph , 28% users uses regularly paybills ,32% users uses a/c

enquiry regularly , 18 % users uses transfer of fund , and 22 % users

uses

order e lerts regularly.

79

Q8. As a costumer how do you know about e-banking?

interpretation

80

in this graph , there are 22%users know e banking through bank

officials, 10% users are know about e banking through advertisement in

media, 16% users know about e banking through television $ radio , 52

% know through online advertisement.

Q9. Do you still visit banks since you started using online banking?

81

interpretation

in this graph , there are 76 % users who still visits the banks and 24%

users are not visit to the banks.

82

Q10.How satisfied are you with online banking services?

interpretation

in this graph , there are 58 % are satisfied by online bankig, 30 % users

are neutral , 2% are unsatisfied, and 10% are very unsatisfied.

83

suggestions: -

To prevent online banking from remaining an expensive additional

channel that does little to retain footloose customers, banks must act

quickly.

The first and most obvious step they should take is to see to it that the

basic problem fueling dissatisfaction have been addressed.

After repairing this basic deficiency, banks must ensure that their

services is competitive.

Obviously, it should include checking, savings and brokerage services,

which anchor customers to the institution.

In addition, to meet the challenge of online brokerage and other new

entrants, banks would need to add “supermarkets” selling products such

as mortgage, mutual funds and insurance.

84

Conclusion: -

Online-banking has become a necessary survival weapon and is

fundamentally changing the banking industry worldwide. To day, the

click of the mouse offers customers banking services at a much lower

cost and also empowers them with unprecedented freedom in choosing

vendors for their financial service needs. No country today has a choice-

whether to implement online-banking or not given the global and

competitive nature of the economy. Banks have to upgrade and

constantly think of new innovative customized packages and services to

remain competitive. The invasion of banking by technology has created

an information age and commoditization of banking services.

Banks have come to realize that survival in the new e-economy depends

on delivering some or all of their banking services on the Internet while

continuing to support their traditional infrastructure. The rise of online-

banking is redefining business relationships and the most successful

banks will be those that can truly strengthen their relationship with their

customers. Without any doubt, the international scope of E banking

provides new growth perspectives and Internet business is a catalyst for

new technologies and newbusiness processes. With rapid advances in

telecommunication systems and digital

technology, Online-banking has become a strategic weapon for banks to

remain profitable. It has been transformed beyond what anyone could

have foreseen 25 years ago. However, banks are uncertain about the

regulatory framework for conducting online-business and the regulatory

85

and taxation issues for governing cyberspace presents formidable

problems. Developing such a system is not easy as the Internet is not

organized geographically and it is almost meaningless to refer to a

website as national or local. Any successful attempt at governing

cyberspace will involve significant international cooperation. Tax issues

are being dealt with through O.E.C.D codes along with

intergovernmental cooperation. The Indian experience of online-banking

is gradually merging with its international counterparts. While the

private sector and foreign banks have been fast in adopting Internet

technology in client servicing, there is a gradual trend for the major

public sectors and numerous cooperative units to move in the same

direction. A mix of policy support and security assurance should propel

further Online-banking adoption in India.

Technology innovation and fierce competition among existing banks

have enable a wide array of banking products and services, being made

available to retail and wholesale customer through an electronic

distribution channel, collectively referred to as e-banking. The

integration of e-banking application with legacy system implies an

integrated risk management approach for all banking activities of a

banking institution. Latest recommendations of Basle Committee

recognize that each bank’s risk profile is different and requires a tailored

risk mitigation approach appropriate for the scale of e-banking

operations, the materiality of the risks present and the willingness and

ability of the institution to manage their risks. This implies that a “one

size fits all” approach to e-banking risk management issues may not be

appropriate.

86

Banks have traditionally been in the forefront of harnessing technology

to improve product and efficiency. Technology is altering the

relationships between banks and its internal and external customers.

Technology has also eroded the entry barriers faced by many industries.

With one time investment, technology has brought about superior

products and channel management with a special focus on customer

relationship. The incremental costs incurred for expansion and

diversification are also more beneficial.

The major driving force behind the rapid spread of e-banking is its

acceptance as an extremely cost effective delivery channel. But on the

flipside, it is associated with risks such as reputation risk, security risk,

cross-border risk and strategic risk, which are unique to e-banking.

Banks need to have an effective disaster recovery plan along with

comprehensive risk management tool is significant not only to the bank

but also to the banking system as a whole. All these issues underscore

the importance of sound supervisory policies and high level of

international co-operation among the bank regulators. The Basle

Committee on banking Supervision has taken the lead in this area

through the creation of its Electronic Banking Group – a group

comprising 17 central banks and bank supervisory agencies in the late

1999. The main focus of this group has been to develop sound risk

management practices.

Internet has created plenty of opportunities for players in the banking

sector. While the new entrants have the advantage of latest technology,

the good-will of the established banks gives them a special opportunity

to lead the online world. By merely putting existing service online won’t

help the banks in holding their customer close. Instead, banks must learn

to capitalize their customer’s different online financial-services

87

relationships. The article “Will Banks Control Online Banking?” focuses

on how banks have to reinvent their role to remain as their customers’

preferred bank.

Coming home, India is on threshold of a major banking revolution with

the invasion of net banking. With the concept of payment gateway

coming in, banks are vying with one another for the lion’s share in the

market. Highlighting the benefits of payment gateway over the open-

loop payment mechanism, the article “Banking in the Cyber worlds”

gives a brief report of the tug of war between the two major Indian e-

banking players

Internet Banking Questionnaire

Name (optional):- Gender :- Male [ ]Female [ ]

Q1. Do you know about online banking?

a. Yes [ ] b. No [ ]

Q2. From how many years you are using internet banking ?

a. From 0-2 Years [ ] b. From 3 to 5 Years [ ]

c. More than 5 Years [ ] d. Non user [ ]

Q3. Your Occupation?

a. Service [ ] b. Business [ ]

c. Retired [ ] d. Others [ ]

88

Q4. Your Income (in Rs monthly)?

a. 10000-15000 [ ] b. 15001-25000 [ ]

c. Above 25000 [ ]

Q5. How often do you use online services ?

a. Daily [ ] b. Weekly [ ] c. Monthly [ ] d. Never [ ]

Q6. What are the reason for chasseing online banking services ?

a.Convenience [ ] b. To save time [ ]

. c. 24 hours access to A/c [ ] d. Others [ ]

Q7. Which online feature do you use regularly?

a. Pay bills [ ] b. A/c enquiry [ ]

. c. Transfer funds [ ] d. Order e-alerts [ ]

Q8. As a costumer how do you know about e-banking?

a Through bank officials [ ] b Advertisement inMedia []

c Television & Radio [ ] d On line Advertisement []

Q9. Do you still visit banks since you started using online banking?

a. Yes [ ] b. No [ ]

Q10.How satisfied are you with online banking services?

a. Satisfied [ ] b. Neutral [ ]

c. Unsatisfied [ ] d. Very unsatisfied [ ]

Series1

89

. REFERENCES

1. RAVI, S. (2014). Entrepreneurship Development in the Micro,

Small and Medium Enterprises sector in India, Indian School of

Business P2.

2. GUPTA, R. (2014), Scope of Small Scale Industry in INDIA,

IBS Research Centers, Kolkata.

3. DAS, B. Shil, N.C., Pramanik, A. (2014). Strengthening

SMEs to make export competitive, Munich Personal RePEC

Archieve (MPRA)

4.Madhan, P. M. (2015, February 11). SME's as Growth Driver

of Indian Economy: Strategic HR Issues and Perspectives.

Business Strategies and India’s Economic Growth Conference

(RBCON - 2015).

5. Contribution made by msmes at heart of Indian economy.

(2014, August 24). New Indian Express .

6. India's MSME sector growing faster than overall GDP: Michel

Botzung. (2014, December 30). Business Standard.

90